There has been a lot of talk lately about the “Real Estate Bubble”, and a lot of folks are asking the question: “When it is going to burst”?
They are saying that the market just can’t sustain this level of growth and appreciation much longer, and I heat them say that it is inevitable that it must come crashing down soon. People are worried. They don’t think it can last; That whatever goes up, must come down.
These folks have been conditioned to believe what they believe most likely from the experience of the stock market bubble of 2000, and maybe the 1990’s when the real estate market was hit hard in many large metropolitan areas across the country.
Its human nature to feel this way. We all know the saying (or the 80’s tune for you big hair folks), “Once Bitten, Twice Shy”. Or what about, “All good things must come to an end.”? Its how we react to almost everything that affects our well being and general safety. Its a subconscious reaction at the gut level.
Just like in the stock market, there are bulls and bears. Bulls are typically more optimistic about the market and expect it go up, and bears are generally more pessimistic and expect the market to go down. They will always be there to provide free advice and “expert consulting”. Remember though, who you decide to listen to will certainly have an effect on your decision making, and ultimately your success.
Well, I’m here to say that there is no real estate bubble! There never was a real estate bubble. Its a complete and utter fallacy.
“How can I say that?” you ask. I can say that because the real estate market is in reality, a Wave. Its a cycle, and we just happen to be riding the big swells, or the crest of this long, consistent, and fairly predictable pattern.
There is no doubt that real estate has been a rock solid investment for decades, and will continue to be for the foreseeable future and for many reasons that I would like to demonstrate here and now. Because you, as a real estate investor, must be able to move forward with confidence when deciding which projects and properties you want to buy and sell. That is the purpose of my website, www.realestateinvestment.net [http://www.realestateinvestment.net], to provide you timely information, strategies and techniques to help you succeed.
But first, what is a bubble? In terms of economics and markets, the best definition is probably something along the lines of “an isolated or ephemeral situation or condition with little support or substantiation from external conditions”.
The best example, and the one foremost in the minds of us all, is the stock market tech bubble of 1999 and 2000. We all rushed into the tech stocks and the stock market in general as we saw the .com millionaires being made.
Y2K was a big factor in the tech bubble. People were buying new systems at a unprecedented rate in order to prepare for doomsday. People were also buying consumable goods to stock up for the dreadful event that never came.
So what was holding up, or supporting the “irrational exuberance” as Alan Greenspan characterized it? Well, we learned soon afterward, not much. It was an isolated, temporary incident that had little support from the other conditions. It was indeed like a bubble that burst.
And it has had little support since then. Historically speaking, after the stock market crash of 1929 and 1987, it took decades for the market to recover, although it did eventually recover. Just look at the Dow average and the S&P average for the last hundred years and see the pattern of recovery. You can be sure that a slow steady rise for stocks is in progress.
Now back to real estate. Let me explain why this is not a bubble.
Real Estate is Cyclic
Real estate has had its ups and downs over the years, but it is generally stable, with no drastic swings per se. If you were to look at the cycles on a chart you would see a clear pattern of gently rolling swells. This pattern is consistent across cities and regions all across the United states, although slightly varied in degree.
In addition, the cycles tend to favor the ups rather than the downs. It is not uncommon to see large cycles of appreciation and much smaller downward cycles. In other words, the current double-digit growth we’ve all come to know and love in recent years will likely be followed by downturns of single digit declines. Its like taking two steps forward and one step back. pinetree hill condo